When I became BP chief executive just over a year ago, I warned that the supply and demand balance for energy was very tight. But, in common with most people, I never expected to see the oil price go quite as high, quite as rapidly, as it has in the past few months.

Unsurprisingly, with consumers and businesses everywhere facing much higher fuel costs, emotions are running high. I understand those feelings. Governments and the energy industry are urgently looking for solutions. But if we are to act sensibly, we must start with the facts. We must accept the world as it is, not as we hope for it to be.

On Wednesday, BP is launching the latest edition of the BP Statistical Review of World Energy*. This is the 57th year of its existence and during that time the review has established a reputation as one of the most reliable sources for objective energy data worldwide. At times such as these it is a useful analytical tool for those both inside and outside the industry.

It also exposes some myths that need to be put to rest if we are to find the right solutions to big global problems such as energy security and climate change.

The first myth is that high prices are caused by technical factors, such as speculation. While these factors may have an impact on the margins, the data clearly show that high prices are really caused by economic fundamentals.

Global energy demand growth in 2007 was above average for the fifth year in a row, driven by the fastest period of economic growth since the early 1970s. Demand growth is concentrated in those emerging nations that also subsidise fuel prices, such as China, India and – increasingly – the oil-producing nations themselves.

Yet energy supply has struggled to respond. Production by the Organisation of the Petroleum Exporting Countries fell by 350,000 barrels of oil a day last year. The production situation is even more challenging in the market-oriented nations of the Organisation for Economic Co-operation and Development, where many existing basins are maturing fast. In Britain, for instance, North Sea gas production recorded the world’s lar-gest decline for the second year in a row, falling by 10 per cent in 2007. UK oil output rose very slightly, but this is a one-off, based on a single big new field. Production remains on a downward trend.

The last time oil prices surged to this kind of level, 30 years ago, new production from the North Sea helped bring prices down. This time, new OECD production will have to come from frontier provinces such as the Canadian oil sands, the Arctic and the deep waters of the Gulf of Mexico.

Another big impact on supply is Russia, where production has begun to decline. It is a little-known fact that, until now, the growing demand for oil from China and India in recent years has been met almost barrel for barrel by rising supply from Russia.

Access to resources for international oil companies such as BP remains very restricted. Resource nationalism is on the rise. That is important because it is the oil majors that have some of the best technology for bringing difficult resources on-stream.

Myth number two is that the world is running out of hydrocarbons. Not so. The world has ample resources, with more than 40 years of proven oil reserves, 60 years of natural gas and 130 years of coal. The problems in bringing on new production are not so much below ground as above it, and not geological but political.

Myth number three is that we can switch quickly to a low-carbon economy. While biofuels, wind and solar energy are growing rapidly, they comprise a tiny share – less than 2 per cent – of global energy production. Humankind remains dependent on fossil fuels and coal is the fastest-growing of all the main fuel types. Carbon emissions continue to rise. We clearly all need to work harder if we are to tackle the threat of climate change.

So how are we to secure the energy needs of the world in the 21st century? The evidence is that where markets are allowed to operate, they do work. That is what the data in the review show. And that is the real source of hope for the future. Consumers in Europe and north America are already responding to high prices by moderating demand. They are also beginning to embrace energy efficiency. Where investment is allowed to take place, energy production responds positively. Last year, US oil and natural gas production increased – in the case of oil, for the first time since 1991.

The conclusion is therefore simple. Producers and consumers should be encouraged to respond to the market’s signals. High prices are saying that we need more investment – in energy efficiency, new production, new technology and new energy sources such as wind, solar and nuclear.

In order for that to happen, businesses and governments must act together. Companies know that they need to invest more, which is why BP and its peers have been raising capital expenditure substantially. But governments must do their bit too, by removing the barriers to that investment, improving access to resources and modernising the tax structures we work in.

* www.bp.com/statisticalreview

The writer is chief executive of BP